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Earlier this year we talked about the two stage model. This same model came up again in the last lecture when we talked about the
Earlier this year we talked about the two stage model. This same model came up again in the last lecture when we talked about the terminal value. The dividend discount model shown below shows the "terminal value" (also known as "horizon value") in blue. What does the blue portion of the formula represent? (Note that the list of answers below doesn't allow for subscripts so gl = 91). DN (1+92) -92 Priceo D. (1+91) (1+r) + This is the present value in year 0 dollars of the first N dividends. The dividends are growing at gl growth rate each period. This is the present value in year N dollars of all the dividends after year N. The dividends are growing at a g2 growth rate each year This is the sum of all the dividends after year N in year O dollars. This is the present value in year O dollars of all the dividends after year N. The dividends are growing at a g2 growth rate each year. 11 15 This is another question on the two-stage discount dividend model. In what year's dollars are "DN(1+92)" shown in red below? Priceo Do(1+91) DN (1+92) P-92 (1+r)^ t=0 + O year N+1 year N year 0 O year 82 12 19 This is another question on the two-stage discount dividend model. What does the " (1+r)" part of the equation do? (shown in blue) N Priceo D. (1+91) (1+r) + DN (1+92) -92 (1+r)^ This discounts the red portion back N+1 years to year 0 dollars. This discounts the red portion back N years to year 0 dollars
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